Global markets are poised for more volatility this week as some key issues that have been affecting market sentiment approach decision points. It had been a relatively quiet day on Friday with the stock indices and risk trades having a bit of a breather after a strong week with some profit taking flow perhaps coming through the market ahead of risk events fast approaching. Tuesday’s Brexit deal vote in the UK’s parliament is top of the list in terms of definitive risk events and the smart money is on PM Theresa May’s vote getting rejected and possibly by a large margin. Also firmly in market focus is the continuing government shut down in the US which has now broken records for it’s length and has the market concerned for its economic impact with no end in sight at the moment.
Sterling traders in particular will be looking ahead to Tuesday’s trading session with some trepidation as a plethora of different outcomes after the vote count could lead to huge volatility in the pound. A defeat for the deal should see pressure exerted on sterling as the possibility of a no deal Brexit comes closer, however there could be a strong counter move back to the topside if it results in the possibility of a complete re-think on Brexit for the UK. This could come about if the opposition push ahead with their promised vote of no confidence or if calls for a second referendum gain force. There is a strong probability that we will see more volatility in the days after the result than on the actual result itself.
US markets will continue to come under pressure as the government shut down rolls on, but investors are also looking ahead at several earnings reports this week which could add to the downside. US banks are set to come under the microscope this week and analysts are predicting poor results with trading performance of particular concern.
Looking ahead to today’s trading’s trading and it’s a relatively quiet day in terms of economic data releases with probably the Chinese Trade Balance the only tier 1 data set to trouble the scorers. Expect sentiment to continue to dominate market direction with trades focussing closely on the news channels for the next twist in the various issues that are influencing the market.